Banks lead Tokyo stocks higher

BOJ eases monetary grip; UMC returns to profit in Q3

By

MarikoAndo

TOKYO (CBS.MW) -- Japanese stocks edged higher on Wednesday as major banks drew buying amid growing speculation that a key bank reform plan due later in the day would be less harsh than previously expected.

To support the government's efforts to tackle deflation, the Bank of Japan decided to ease its credit grip further, saying it will increase the monthly outright purchase of long-term government bonds by 200 billion yen to 1.2 trillion yen ($9.8 billion).

The BOJ will also raise the target level for the outstanding balance of current account deposits held at the central bank by private financial institutions to 15 to 20 trillion yen from the current target of around 10 to15 trillion yen. See full story.

There was little initial response seen in the currency market following the BOJ's decision. But the dollar weakened to 122.63 yen in the late afternoon session mainly due to institutional dealers' position adjustment. The greenback bought 123.20 yen in New York late Tuesday.

The Nikkei Average advance 47.83 points, or 0.6 percent, to close at 8,756.59. The broader Topix Index was up 0.9 percent at 870.23.

Local media reported that Heizo Takenaka, Japan's chief banking regulator, has compromised on his controversial plan to accelerate the disposal of bad loans, in a bid to break a deadlock preventing the government from completing a major economic package.

The measures, to be announced Wednesday night, is likely to include a plan that will set up an institution to support ailing companies that can be rehabilitated, said the Nihon Keizai daily. A toughening of rules on deferred tax accounting would also likely be postponed indefinitely, said the report.

Elsewhere in the region, stock markets in South Korea, Taiwan and Australia declined. Technology issues were under pressure across the region tracking losses in their U.S. counterparts overnight.

These banks last week expressed strong opposition to the drastic bank reform plans by Takenaka, which includes tougher deferred tax accounting standards. Bank executives said the proposed plan would reduce the banks equity capital and lead them to reduce lending in order to prevent their capital ratios from declining.

Limiting Tokyo's gains, meanwhile, was a caution amid a peak season of corporate earnings by the country's key companies. Amid such big firms, Toyota Motor
TM, -1.58%
(7203) dropped 1.5 percent to 2,955 yen ahead of its earnings later today.

Advantest (6857)
ADTTF, +8.00%
the maker of semiconductor testing devices, lost 6.6 percent to 3,840 yen also ahead of the earnings.

Fujitsu
FJTSY, -0.57%
(6702) tumbled 7 percent to 412 yen. Investors dampened the shares after the company late Tuesday warned it would miss its break-even target and instead lose of 110 billion yen ($894 million) in the fiscal year ending next March 31 due to a massive extraordinary charges for its restructuring steps. See full story.

But Canon
CAJ, -0.42%
(7751) jumped 3.5 percent to 4,470 yen after the company late Tuesday reported a 53.4 percent jump in third-quarter net income and raised its forecast of record profit for the full year. See full story.

Matsushita Electric Industrial
MC, -0.08%
(6752) closed up 1.4 percent at 1,303. The company said it returned to profit in the first half year but also shaved its full-year earnings target due to sluggishness in the global economic recovery. See full story.

China Telecom IPO in focus

Mainland telecom stocks extended losses on fears that the new listing of China Telecom might soak up investment interests in the industry. China Telecom, which hopes to raise up to $3.68 billion in the world's third-biggest offering this year, will be pricing its IPO later in the day or on Thursday in New York.

UMC returns to profit in Q3

Taiwan's Weighted Index lost 1.2 percent to 4,498.73 points. The index has fallen over 17 percent so far this year, making it the region's second worst performer after Hong Kong.

United Microelectronics
UMC, -0.55%
tumbled 3.5 percent to NT$24.50. After the market closed, UMC reported a third quarter net profit of NT$1.4 billion, in line with market's expectations. The company reported a net loss of NT$4 billion yen a year-ago period.

Sales increased 3.1 percent from an earlier year to NT$19.2 billion.

But citing an ongoing weakness in demand for chips, UMC said it cut its full-year budget for new equipment approximately NT$27.8 billion from originally targeted NT$45 billion.

In South Korea, a heavy selling in technology shares dragged down the key Kospi by 2.3 percent to 658.03.

Samsung Electro-Mechanics fell 0.9 percent to 45,650 won. Investors were little excited even after the country's biggest electronics parts and components maker said has swung into the black in the third quarter with a profit of 62 billion won. That's against a loss of 21.3 billion won a year earlier.

Singapore's Straits Times Index was trading up 0.7 percent at 1,460.38 as gains in several blue-chip shares more than offset losses in ST Assembly Test Services
STTS

Singapore chip tester company reported a narrower than expected third-quarter loss of $17.6 million, after posting a loss of $32.3 million in the year-ago period. But the company warned of a slower fourth quarter as chip demand stalled. The company's shares lost 0.8 percent to S$1.27.

Singapore Airlines
SGPJF
gained 3.7 percent to S$11.2 following a local media report that the airlines has raised cargo charge for the U.S. west coast.

Australia's All Ordinaries Index declined 0.3 percent to close at 2,960 points, led lower by a 3.1 percent tumble in News Corp.
NWS, +0.00%
to A$10.42.

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